Can I Buy Long-Term Care Insurance for My Parents?

Buying long-term care insurance for your parents is generally possible to help manage future care costs. This insurance covers expenses not typically included in standard health insurance, such as assistance with daily activities or professional care. Initiating this process involves important considerations and steps, requiring careful planning and collaboration with your parents.

Parental Consent and Involvement

Your parents’ active participation and consent are fundamental when considering long-term care insurance on their behalf. Insurers require the proposed insured to sign application forms and provide personal health information; without their cooperation, a policy purchase is not feasible. This consent is necessary because the policy directly pertains to their health and future care needs.

Open communication with your parents about their health, financial situation, and wishes for future care is essential. They will likely need to undergo medical evaluations, including reviewing medical records, participating in phone interviews, and potentially having in-person health assessments. Their direct involvement ensures transparency and that the policy aligns with their preferences.

Understanding Eligibility and Policy Options

To qualify for long-term care insurance, parents must meet specific age and health criteria. Most insurers prefer applicants to be in good health, with an ideal age for application often falling between 50 and 60 years old. While policies can be purchased for individuals up to their mid-70s or early 80s, premiums typically increase significantly with age, and the likelihood of denial also rises for older applicants. Certain pre-existing conditions or cognitive impairments, such as Alzheimer’s or Parkinson’s disease, can lead to automatic declines.

Insurers assess eligibility largely based on an individual’s ability to perform Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs). ADLs include self-care tasks like bathing, dressing, eating, and transferring. IADLs involve activities necessary for independent living, such as managing medications or preparing meals. Most policies require a medical professional’s certification that the individual cannot perform two or more ADLs, or has a severe cognitive impairment requiring supervision, before benefits are triggered.

Long-term care policies also feature several core components that shape their coverage:
The daily or monthly benefit amount specifies the maximum sum the insurer will pay for care services.
An elimination period, similar to a deductible, is the number of days care must be received and paid for out-of-pocket before the policy benefits begin, commonly ranging from 0 to 365 days.
The benefit period defines the duration of coverage, typically expressed in years or as a total dollar amount.
Inflation protection riders, often available at 3% or 5% compound or simple interest, help ensure the policy’s benefits keep pace with the rising cost of care over time.

Navigating Ownership and Premium Payments

When purchasing long-term care insurance for your parents, policy ownership and premium payment structure are important financial considerations. A common arrangement involves the parent being the named insured on the policy, while the child acts as the payor. This allows the child to manage the financial aspect, with bills typically sent directly to them or premiums automatically withdrawn.

Another option is for the parents to own the policy and pay the premiums themselves, potentially with financial assistance from the child. In some cases, the child might own the policy, especially if it is a hybrid policy combining life insurance with a long-term care rider, though parents’ consent is still required for them to be named as the insured.

Paying premiums for a parent’s long-term care policy can have tax implications. Premiums paid by a child on behalf of a parent could be considered gifts. The IRS allows an annual gift tax exclusion ($18,000 per recipient per year for 2024). Gifts exceeding this amount may require filing a gift tax return. However, payments made directly to a medical care provider for qualified medical expenses, including long-term care insurance premiums, are generally exempt from gift tax.

Additionally, premiums for tax-qualified long-term care insurance can sometimes be included as medical expenses for itemized deductions on your federal income tax return. This deduction is subject to limitations based on the insured’s age and the overall adjusted gross income (AGI) threshold, typically 7.5% of AGI. It is advisable to consult a tax advisor to understand the specific implications for your situation.

The Application and Underwriting Process

Once preparatory discussions are complete and policy structure decisions are made, the formal application and underwriting process begins. This often starts by working with a licensed insurance professional who can guide you through the necessary paperwork. The application typically requires detailed personal and health history information for your parents.

Following application submission, the insurer’s underwriting team initiates a thorough review. This process involves requesting and examining medical records from your parents’ primary care physicians and specialists. A prescription drug screen is also standard to verify medication history. Insurers may also conduct phone health interviews with your parents, which can include cognitive assessments.

For older applicants or those with specific health concerns, an in-person health assessment may be required, often conducted by a nurse. The underwriting process generally takes approximately six to eight weeks from application submission, though this timeline can vary based on how quickly medical records are provided. Upon completion of the underwriting review, the insurer will issue a decision regarding approval, denial, or an offer of coverage with modified terms.